So is that really what people call the "secret" Henson or Muppet Stitch? Or did they modify the ladder stitch a certain way to make it work even better?

There is much debate about that.  Some say it is and others say that the Henson Stitch is something more. I wonder if Myth Busters would want to do a show on the topic. 

That would be interesting! I discovered a stitch by accident that helps with fur not separating where it's sewn so that you can "see" the seams. I was using the baseball stitch, but was doing it essentially backwards and found it helped the fur to mesh together and keep it from separating where it is sewn. I called it a "reverse baseball stitch". If you look on the Project Puppet site at the stitch tutorial, you can see an illustration depicting the proper method of the baseball stitch. They describe the stitch as follows:

With the right sides of the fabric together, push your threaded needle into the right side of one of the pieces of fabric, close to the edge between the two facing sides, so it comes out the wrong side. Now loop the needle around towards where the two pieces come together, and again, push it into the right side of the opposite piece of fabric so it comes out the wrong side. Continue to stitch in this manner. Your stitches will probably be hard to see, considering that they are small and that the thread is the same color as the fabric, but they will eventually resemble the stitching on a baseball.

My version is more like so:

With the right sides of the fabric together, push your threaded needle into the back side of one of the pieces of fabric, close to the edge, so it comes out the right side between the two pieces of fabric. Now loop the needle around and again, push it into the back side of the opposite piece of fabric so it comes out the right side between the two pieces of fabric. Continue to stitch in this manner.

I hope that isn't confusing, but if it is, look at the illustration and picture stitching opposite from the illustration. It worked really well for fur, don't know how it would look with fleece though! Maybe I should call it the fur stitch lol.

I get it I might have to try it but for right now peanut and my puppet making are on hold I'm on a tight budget I am getting an iPad but thats oing to hold back my puppet making for a bit untill i can "regain" my money and I am going to use polartec 200 instead of regular polar fleece this time so horefully he will look better

Cool, I can't wait to see him! I am building a new puppet right now, using Purple Antron Fleece that I dyed, and the stitch I talked about seems to work with it! Once I get it finished and pick the seams, I'll post photos =] Can't wait to see Peanut finished!

Other than Shawn's advice with the stitching, which I think would help, it's looking good!